California should ban private messages in PUC cases

By Deborah Behles

September 19, 2014

On Monday, Pacific Gas and Electric released another series of e-mails demonstrating improper private communications between high-level utility officials and decision-makers at the California Public Utilities Commission. When asked about the failure to do the right thing, one of the commissioners reportedly stated that he was unaware that the rules prohibited such a contact, and that the commissioners would “take a refresher course on the rules.”

This latest disclosure shows why California needs to join the majority of states by banning all such private communications related to contested proceedings.

These e-mails show PG&E pushing aggressively for the assignment of a different administrative law judge to preside over a contested rate-making proceeding because another judge “has a history of being very hard on us.” Two commissioners and a senior official from the CPUC involved in the e-mail exchanges did not report these improper communications or insist that the utilities stop sending the e-mails. Far from it: These officials actively participated in the exchanges and, if anything, seemed to encourage them.

Although CPUC rules explicitly prohibit communications “regarding the assignment of a proceeding to a particular Administrative Law Judge,” the rules broadly allow private contacts in rate-making proceedings, which are the majority of the CPUC’s contested proceedings, as long as notice is provided to other parties after it occurs. Rate-making proceedings are at the heart of what the CPUC does — it passes judgment on proposals to include the cost of new power contracts and new infrastructure in rates, which in turn determines where most Californians get their electricity and how much it costs. It regulates natural- gas infrastructure and rates.

Given this broad allowance of private contacts, decision-makers in the CPUC regularly engage in off-the-record communications with utilities and other stakeholders, creating a culture of decisions and discussions behind closed doors. This seriously compromises the integrity and the fairness of the process and the public’s right to have a real say in the makeup of their energy infrastructure.

One of the best ways to eliminate questions related to the proper scope of private contacts is to prohibit them in contested proceedings. They have long been prohibited in a judicial setting, due to the fact that they violate the right to a fair hearing. Private contacts also often cannot be rebutted in the adversarial system, and, problematically, they can carry more weight in the decision-making process than the official record. Improper private contacts, such as those revealed by PG&E, raise suspicions of wrongdoing and of an unfair process. Even though the e-mails have been disclosed, it is unclear what has been said in face-to-face conversations and at industry soirees. As one court stated, the public’s right to participate in an administrative process is “effectively nullified” if an agency can “base its decisions on the private conversations and secret talking points and arguments to which the public and participating parties have no access.”

In addition, allowing private contacts, as California does, can consume significant amounts of decisionmakers’ time — time that could be better spent evaluating the official administrative record. Considering the problems with private contacts, it is not surprising that the majority of states prohibit private contacts in contested proceedings before utility commissions unless all parties can participate. The federal agency that regulates utilities, the Federal Energy Regulatory Commission, similarly prohibits private contacts in all on-the-record contested proceedings.

California has often taken a leadership role with progressive energy and environmental policies. But California cannot maintain this high ground unless it ensures that decisions are transparent, robust and based on the official record. Communications behind closed doors breed cynicism and distrust, and they reduce the likelihood of good decision-making. A better practice is to require that decision-makers communicate with parties only in all-party public meetings.

For all these reasons, California should align itself with the majority of states and prohibit private contacts in contested proceedings. This would be a first step toward restoring the integrity of the decision-making process at the CPUC.

Deborah Behles is an associate professor at Golden Gate University School of Law.